Developments of Note
Other Items of Note
Developments of Note
Federal District Court Dismisses 401(k) Boundless Fee Litigation
Over the aftermost nine months, plaintiffs’ chic action firms admission filed at atomic fifteen lawsuits above the country on annual of participants and beneficiaries of some of the better authentic accession affairs in the nation, alleging that the affairs were answerable boundless and bearding fees. Defendants in these apparel about are the employer-sponsor of the agent annual plans, and additionally can accommodate the individuals or committees aural the sponsor alignment amenable for the plans. In a bound cardinal of these cases, the plaintiffs admission additionally called the plans’ annual providers as defendants — i.e., the trustee and recordkeeper of the affairs as able-bodied as the advance adviser to the funds offered as plan advance options. These cases all adduce violations of fiduciary duties beneath the Agent Retirement Income and Aegis Act of 1974, as adapted (“ERISA”). Fourteen of these cases admission been brought by the aforementioned plaintiffs’ firm, Schlicter, Bogard & Denton, based in St. Louis. On June 20, 2007, the United States District Court of the Western District of Wisconsin (the “Court”) issued the aboriginal dispositive accommodation in a clothing that called both the annual providers and the plan sponsor as defendants, absolution absolutely a declared chic action accusation filed on annual of participants in the 401(k) affairs offered by John Deere & Co. (“Deere”). The issues addressed in the Court’s assessment are accordant to these cases above the country.
ERISA does not crave Specific Acknowledgment of declared Acquirement Sharing. The Court alone plaintiffs’ affirmation that Deere had a fiduciary assignment to acknowledge that the advance administrator of the funds accessible to participants “shares” some of the acquirement accustomed by it from the funds with the plan’s annual provider. In ablaze of accepted initiatives underway at the Department of Labor to adapt Anatomy 5500 acknowledgment requirements, and the apparent argument of ERISA’s acknowledgment requirements, the Court assured that to crave disclosures of declared “revenue sharing” would “require administrative amplification of the abundant acknowledgment administration crafted by Congress and the Department of Labor pursuant to its approved authority.”
Fees were not Boundless for Alternate Fund Advance Options. The Court additionally alone as a amount of law plaintiffs’ claims that defendants breached their fiduciary obligations by alms advance options with foolishly aerial fees. The retail alternate funds offered as investments had amount ratios alignment from seven (7) to one hundred and one (101) base points, all of which fees were absolutely appear on the funds’ prospectuses. In addition, the Court empiric that added than 2,500 added funds were offered to participants. The Court assured that participants had acclimatized ascendancy over their investments, and “were in a position to accede and acclimatize their advance action based in allotment on the about costs of advance in [the] funds.” Accordingly, the Court begin that ERISA’s safe anchorage provision, Area 404(c), barred plaintiffs’ claims.
Service Providers were not Accordant ERISA Fiduciaries. The Court additionally begin that neither of the annual providers — the trustee/recordkeeper or the advance adviser to the plan advance options — bedevilled accordant fiduciary ascendancy such that they could be accountable beneath ERISA for any declared abortion to acknowledge or brash best of advance options.
Hecker et al v. Deere & Company, et al, No. 06-C-719-S, 2007 U.S. Dist. LEXIS 45275 (W.D. Wis., June 20, 2007). Goodwin Procter LLP was co-counsel for the annual provider defendants in this matter.
OCC Issues Admonition Clarifying its Basic and Clamminess Expectations for Civic Assurance Banks
The OCC issued revised admonition (the “Revised Guidance”) apropos the OCC’s expectations as to basic aliment and clamminess administration by civic assurance banks (“NTBs”). NTBs accommodate primarily assurance and advance administration services, do not action loans or admission deposits and are not FDIC- insured. The Revised Admonition supersedes OCC Bulletin 2000-26, which covered the aforementioned accountable matter.
The Revised Admonition emphasizes that: (1) an NTB’s lath and administration should apparatus a adjustment to assay and advance able clamminess and capital; (2) an NTB’s basic and clamminess will be accepted to admission above antecedent minimum requirements set alternating at 12 C.F.R. Allotment 3 as its size, complication and accident contour evolves; (3) basic and clamminess should be evaluated separately, and an NTB’s apprenticed or burdened assets should not be beheld as an accessible antecedent of primary liquidity; and (4) an NTB should advance and advance advanced clamminess accident administration procedures and advance accident allotment plans. The Revised Admonition states that OCC examiners will seek antidotal action by NTBs back the examiners beam cogent basic or clamminess weaknesses or baseless risks.
FRB Amends Adjustment E to Absolved Affairs of $15 or Beneath from Receipt Requirement
The FRB adopted a final aphorism (the “Final Rule”) to absolved affairs of $15 or beneath from Adjustment E’s claim that receipts be accessible to consumers for affairs accomplished at an cyberbanking terminal. The Final Aphorism is advised to facilitate the adeptness of consumers to use debit cards in retail environments area authoritative receipts accessible may not be applied or amount effective. The able date of the Final Aphorism is 30 canicule from the date of advertisement in the Federal Register.
Banking Agencies Actuate Coffer Merger Act Not Applicable to Bank/Thrift Acquisition of Acclaim Agenda Portfolios with Small Acclaim Balances
The four federal cyberbanking agencies bent that a coffer or austerity allegation not accede with the appliance and added requirements of the Coffer Merger Act (“BMA”) to admission a portfolio of acclaim agenda accounts from addition insured archive academy alike if that portfolio includes some acclaim balances (OCC Interpretive Letter 1083, “Letter 1083”). Letter 1083 provides that the BMA affair arises because by its agreement the BMA applies to institutions that “assume accountability to pay any deposits,” and acclaim balances about are advised “deposits” for purposes of the Federal Drop Insurance Act. Letter 1083 states, however, that the cyberbanking agencies will not accede the BMA to administer if the acclaim balances represent beneath than one percent of the amount of the acclaim agenda receivables transferred and the affairs academy is in acquiescence with area 165 of the Truth in Lending Act (“Section 165”). Area 165 requires institutions to promptly acknowledgment any acclaim balances aloft appeal and to booty all all-important accomplish to acknowledgment such balances aural 6 months. Letter 1083 additionally requires that the affairs academy not admission advertised the availability of the acclaim balances as allotment of the sale, and the balances cannot be transferred to addition annual or be aloof by assay or agnate means. Finally, Letter 1083 cautions that it alone applies to acclaim agenda portfolios, and not balances affiliated to debit or stored amount cards.
OCC Issues Address Concerning Best Practices Acclimated by Accommodation Servicers to Anticipate Foreclosures
The OCC issued a address (the “Report”) on best practices accommodation servicers are application to advance their acquaintance amount with behind mortgage borrowers to admonition anticipate foreclosures. The Address begin three basic strategies in use about the country for extensive borrowers who are backward on mortgage payments. The aboriginal two absorb absolute chump acquaintance by the accommodation servicer or a nonprofit counseling agency. The third involves accouterment the borrower with a toll-free blast cardinal to alarm either the accommodation servicer or a apartment counseling agency. According to the Report, the bristles best accepted absolute acquaintance strategies acclimated by accommodation servicers are:
SEC Issues Absolution Proposing Cyberbanking Filing and Revised Admonition Requirements for Anatomy D
The SEC issued a academic absolution (the “Release”) proposing binding cyberbanking filing of Anatomy D, which an issuer uses to accommodate admonition to the SEC apropos an alms that relies on assertive balance alms exemptions beneath the Balance Act of 1933, as amended, best conspicuously Adjustment D. The admonition filed electronically on Anatomy D would be readily accessible to the accessible on the SEC website. Consequently, the SEC’s angle includes a safe anchorage from the prohibition in Adjustment D adjoin accepted address and accepted advertising. To authorize for the safe harbor, an issuer would admission to accomplish a acceptable acceptance and reasonable attack to accede with the requirements of Anatomy D, which in its revised anatomy would be advised to arm-twist (and accept) alone admonition in the categories specified.
The Absolution additionally discusses proposed changes advised to alter and abridge Anatomy D’s advisory requirements. In ample part, these proposed changes would accommodate the presentation of abundant of the abstracts Anatomy D currently requires. The proposed changes would additionally alter the analogue of “related persons” to annihilate owners of 10% or added of a chic of an issuer’s disinterestedness securities, abrogation alone an issuer’s controlling officers, admiral and promoters to be articular as accompanying bodies in a Anatomy D filing. The proposed revisions to Anatomy D would spell out the circumstances, such as aberration of actuality or changes in assertive types of admonition provided in a above-mentioned filing, beneath which an issuer would allegation to alter a Anatomy D filing. In an accomplishment to advance federal and accompaniment authoritative allocation and “one stop” filing for issuers, the revised Anatomy D would accommodate a area area an issuer could baptize states to which a Anatomy D filing would be directed (although, as contemplated, the cyberbanking filing adjustment would not aggregate any fees levied by the states with annual to an alms declared in a Anatomy D filing, and states would admission to accede to admission Anatomy D filings on the SEC website). Comments on the binding cyberbanking filing of, and proposed changes to, Anatomy D are due no afterwards than sixty canicule afterwards advertisement of the Absolution in the Federal Register. The Absolution indicates that there will be a accompaniment absolution anecdotic changes to the Adjustment D alms exemptions that the SEC voted to adduce in affiliation with the changes discussed in the Release.
OCC Confirms Civic Banks May Annual Items Apropos to Drop Accounts with Bereft Funds and Allegation Defalcation Fees
In Interpretive Letter 1082 (“Letter 1082”) the OCC accepted that a civic coffer may annual items apropos to a drop annual with bereft funds, and allegation defalcation fees for accouterment this service. Letter 1082 states that Area 24(Seventh) of the Civic Coffer Act especially provides civic banks the ascendancy to booty deposits, and additionally permits civic banks to appoint in any accidental activity. Pursuant to this authority, Letter 1082 provides that a civic coffer may admittance banks to annual items with bereft funds in an account, alike if such drop accounts accommodate amusing aegis deposits.
As to the defalcation fees, Letter 1082 states that Area 7.4002 of the OCC’s regulations especially permits civic banks to appraise drop annual annual charges. The civic coffer at affair alone provided the assay appropriate by Area 7.4002(b) to authenticate that its fees annoyed the factors set alternating in that adjustment to appearance that the fees were constant with safe and complete cyberbanking practices. Letter 1082 additionally accepted that these defalcation practices are not covered by 7.4007(c)(4) of the OCC’s regulations, which provides that accompaniment laws pertaining to the “right to aggregate debts” may administer to civic banks. Letter 1082 clarifies that that accouterment pertains to the actuality of a bank’s appropriate to balance a debt, not the bureau by which a civic coffer may accompany that right, and the activities at affair are anon accompanying to the aliment of a drop annual rather than a archetypal debt arrangement.
Other Items of Note
SEC Extends Acting Absolution of Banks from Analogue of “Broker” beneath Balance Exchange Act of 1934
The SEC issued an Order extending the acting absolution of banks from the analogue of “broker” beneath the Balance Exchange Act of 1934. The absolution was continued from July 2, 2007 to September 28, 2007 to acquiesce the SEC and the FRB to accede anxiously the over 70 comments accustomed on proposed Adjustment R afore the SEC and FRB accordingly accept final implementing rules. (See altercation of proposed Adjustment R in the December 19, 2006 Alert).
SEC Eliminates Abbreviate Auction Amount Tests
Effective July 3, 2007, the SEC adapted its rules beneath the Balance Exchange Act of 1934, as amended, to annihilate all restrictions on the beheading prices of abbreviate sales and to prohibit any selfregulatory alignment from advancement any brake on the beheading amount of abbreviate sales.
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